Boeing 2011 Annual Report Download - page 69

Financial Services Revenue We record financial services revenue associated with sales-type/finance
leases, operating leases, and notes receivable.
Lease and financing revenue arrangements are included in Sales of services on the Consolidated
Statements of Operations. For sales-type/finance leases, we record an asset at lease inception. This
asset is recorded at the aggregate future minimum lease payments, estimated residual value of the
leased equipment, and deferred incremental direct costs less unearned income. Income is recognized
over the life of the lease to approximate a level rate of return on the net investment. Residual values,
which are reviewed periodically, represent the estimated amount we expect to receive at lease
termination from the disposition of the leased equipment. Actual residual values realized could differ
from these estimates. Declines in estimated residual value that are deemed other-than-temporary are
recognized as Cost of services in the period in which the declines occur.
For operating leases, revenue on leased aircraft and equipment is recorded on a straight-line basis
over the term of the lease. Operating lease assets, included in Customer financing, are recorded at
cost and depreciated over the period that we project we will hold the asset to an estimated residual
value, using the straight-line method. We periodically review our estimates of residual value and
recognize forecasted changes by prospectively adjusting depreciation expense.
For notes receivable, notes are recorded net of any unamortized discounts and deferred incremental
direct costs. Interest income and amortization of any discounts are recorded ratably over the related
term of the note.
Reinsurance Revenue Our wholly-owned insurance subsidiary, Astro Ltd., participates in a
reinsurance pool for workers’ compensation. The member agreements and practices of the
reinsurance pool minimize any participating members’ individual risk. Reinsurance revenues were
$144, $139 and $122 during 2011, 2010 and 2009, respectively. Reinsurance costs related to
premiums and claims paid to the reinsurance pool were $142, $123 and $118 during 2011, 2010 and
2009, respectively. Revenues and costs are presented net in Cost of services in the Consolidated
Statements of Operations.
Fleet Support
We provide assistance and services to facilitate efficient and safe aircraft operation to the operators of
all our commercial airplane models. Collectively known as fleet support services, these activities and
services include flight and maintenance training, field service support, engineering services, and
technical data and documents. Fleet support activity begins prior to aircraft delivery as the customer
receives training, manuals, and technical consulting support. This activity continues throughout the
aircraft’s operational life. Services provided after delivery include field service support, consulting on
maintenance, repair, and operational issues brought forth by the customer or regulators, updating
manuals and engineering data, and the issuance of service bulletins that impact the entire model’s
fleet. Field service support involves our personnel located at customer facilities providing and
coordinating fleet support activities and requests. The costs for fleet support are expensed as incurred
as Cost of services.
Research and Development
Research and development includes costs incurred for experimentation, design, testing, and bid and
proposal efforts related to government products and services which are expensed as incurred unless
the costs are related to certain contractual arrangements with customers. Costs that are incurred
pursuant to such contractual arrangements are recorded over the period that revenue is recognized,
consistent with our contract accounting policy. We have certain research and development
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